It was founded on 1879 by the historical worker leader Pablo Iglesias. The PSOE formed the Government during the second Spanish Republic (1931-1936) and as part of the Spanish Popular Front ("Frente Popular"), elected to government in 1936. During the Spanish Civil War, it divided into two wings: the left, revolutionary, and Marxist wing, led by Francisco Largo Caballero, and the right, reformist wing, led by Indalecio Prieto and Julian Besteiro.
During the dictatorship of Francisco Franco (1939-1975) the PSOE was illegal and it was persecuted. Many of their leaders and militants were assassinated, imprisoned or they went to France, the United States, or Mexico. In the first democratic elections (1977), it arose as the second party of Spain, with 30% of the votes. In 1979 it obtained similars results. From 1974, its general secretary was Felipe González, who moved the party away from its Marxist and socialist path, turning the PSOE into a social-democratic party, similar to those of the rest of western Europe. To this end, he banned the Marxist wing, directed by the Trotskyist newspaper New Clarity, similar to the British Socialist Appeal (former Militant).
In 1982, the PSOE won an historic electoral victory, with more than 10,000,000 votes (48%). Felipe González became Prime minister, a position that he occupied from 1982 to 1996. In spite of its appearance as a leftist party, with a progressive program, the PSOE made a policy of social reforms combined with a liberal and capìtalist economic policy. In addition, it was favorable to the entrance of Spain in NATO (1986) and supported the United States in the Gulf War (1991). The PSOE won 1986, 1989 and 1993 elections.
An economic crisis, scandals of corruption and state terrorism against the Basque violent separatist group ETA eroded the popularity of Felipe González, and in 1996, the PSOE lost the elections to the conservative Partido Popular ("Popular Party") (PP). Between 1996 and 2001 the PSOE weathered a crisis, suffering a hard defeat in 2000 (34.7%), after agreeing with Izquierda Unida ("United Left") (IU).
In 2001, a new general secretary, Jose Luis Rodríguez Zapatero, was elected, replacing Felipe González, and renewing the party. Later, the PSOE won the municipal elections of 2003. Some pundits predict PSOE victory in the 2004 legislative elections.
See also: Politics of Spain